Securitization

Securitization of assets is a process through which an issuer creates a financial instrument by transforming an illiquid asset such as receivables into securities, in order to sell it to investors. Those instruments are secured by future cash flows connected with asset.
The purpose of this transaction can be shortening of collection period at one hand and on the other transferring risk of insolvency.
Securitization is a common form of financing an operational business especially among banks.

Structure of process

Company selects assets to securitization

Foundation of Special Purpose Vehicle (SPV)

Assets are transferred to SPV

SPV is preparing offering of instruments

Securities are sold to investors

SPV transfers collected cash to the company

SPV is created to eliminate risk of bankruptcy of the company and because of that to lower interest rates from potential investors.